'For you ... anything.' Barclays Libor emails paint ugly picture

Ever feel like the financial markets are simply a rigged game where the house (i.e. the world's largest banks) always win? Reading text messages and emails between traders at Barclays (BCS) about their often successful attempts to manipulate global benchmarks for interest rates will only reinforce that belief.

These traders influenced the pricing of the London Interbank Offered Rate or Libor, a benchmark that dictates the pricing of up to $800 trillion of securities (yes trillion) and several other key benchmarks between 2005 and 2009.

Traders' emails and text messages were made public as part of a $453 million settlement Barclays with U.S. and U.K. regulators to settle its role in the Libor manipulation. Libor rates are reset daily by British banking regulators who receive quotes from up to 18 banks on what it costs them to borrow in the public markets each day.

Interest rate swaps traders in New York and London asked Barclays employees and employees at other banks to move rates in directions that benefited their trading positions, according to the bank's settlement with the Commodity Futures Trading Commission.

Barclays' settlements with the CFTC and the U.K.'s primary banking regulator reveal emails from Barclays and traders at other banks that have not yet been named.

Traders refer to the "fixings" as the numbers used to calculate Libor. Banking regulators that use information from the banks to set the rates typically throw out the highest and lowest borrowing costs.

In one email dated November 22, 2005, a senior trader in New York wrote to a trader in London:

"WE HAVE TO GET KICKED OUT OF THE FIXINGS TOMORROW!! We need a 4.17 fix in 1m (low fix) We need a 4.41 fix in 3m (high fix)." 1m and 3m refer to one-month and three-month Libor rates.

Nearly six months later, on February 1, 2006, another New York trader asks a London trader to keep the three-month Libor rate low until the bank gets out of its position:

"You need to take a close look at the reset ladder. We need 3M to stay low for the next 3 sets and then I think that we will be completely out of our 3M position. Then its on. [Submitter] has to go crazy with raising 3M Libor."

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For consumers, lower rates on mortgages, auto loans and student loans dictated by Libor are something to cheer. And in many cases, Barclays' traders did act to push rates down -- but not all the time:

"We have another big fixing tom[orrow] and with the market move I was hoping we could set the 1M and 3M Libors as high as possible," a trader in New York asked an individual who submits the banks' rates to British regulators on May 31, 2006.

Going through the emails, it looks like the submitters were usually happy to oblige any request from traders.

"For you ... anything. I am going to go 78 and 92.5. It is difficult to go lower than that in threes," a submitter wrote to a trader in response to his request for a high one-month and low three-month U.S. Dollar Libor.

Responses from two other submitters read: "Always happy to help, leave it with me, Sir," and "Done ... for you big boy ... "

"[Senior Trader] owes me!" reads another.

It seems that the rewards were tasty. Champagne was popped, judging from another email: "Dude. I owe you big time! Come over one day after work and I'm opening a bottle of Bollinger."

The emails clearly paint a picture of collusion among banks. A former Barclays' senior Euro swaps trader sent requests back to Barclays from another bank for help with his derivatives positions.

Senior Euro Swaps Trader: "i have a huge 1m fixing today and it would really help to have a low 1m tx a lot."

Submitter: "I'll do my best."

Senior Euro Swaps Trader: "because I am aware some other banks need a very high one ... .if you could push it very low it would help. I have 50bn fixing."

Meanwhile, according to CFTC documents, once articles about possible rigging on Libor appeared in The Wall Street Journal in April 2008, a "senior Barclays Treasury manager" told an official at the British Bankers' Association in a telephone call that the bank had not been reporting LIBOR accurately, but hinted that Barclays was not the worst offender: "We're clean, but we're dirty-clean, rather than clean-clean."

The BBA representative responded, "no one's clean-clean."

In another scenario, traders from several banks tried to influence a rate for futures contracts expiring in March 2007. To do this, a trader asked traders at three other banks to push these rates in a specific direction. Excerpts from an instant message conversation from one trader, labelled "E", read as follows:

"If you know how to keep a secret I'll bring you in on it,"

"We're going to push the cash downwards on the imm day.." The IMM day is one of four days per year that futures contracts settle.

"This is the way you pull off deals like this, don't talk about it too much, 2 months of preparation ... the trick is you must not do this alone ..."

According to the Barclays' documents, Libor and other key benchmarks were rigged between 2005 and 2009. Since the settlement was announced last week and some documents became public, the fallout for Barclays has been swift.

Barclays' CEO, COO and chairman of the board have all resigned this week. But it is still too soon to say if the bank is getting close to finally putting the Libor mess behind it -- and whether the damage might be even worse at other banks.

Maureen Farrell is a staff writer at CNNMoney and covers Wall Street, banking, mergers and the stock and bond markets. Prior to joining CNNMoney, she covered venture capital and entrepreneurs for Forbes, and mergers and bankruptcy for Mergermarket and Debtwire, both divisions of the Financial Times.